Editor's Note: This is the second in a two-part series focused on some of the recent regulations impacting healthcare providers. Last month, Medical News looked at the new Red Flags rule and the imminent Recovery Audit Contractor program. This month, we are delving deeper into the RAC appeals process and looking at the growing issue of other types of audits, as well.

To review the July article, please visit us online at www.medicalnewsinc.com and click on any of the Tennessee papers under "Our Publications." A search for "Rules, Regs" will bring up part one in the series.

What to Do if You Are the Subject of a Medicare Audit

First there were MACs … now come the RACs. The Centers for Medicare and Medicaid Services (CMS) are relying on both internal and external fiscal intermediaries to make sure healthcare claims are properly processed, billed and reimbursed for services rendered.

The internally run Medicare Administrative Contractor (MAC) program was created as a primary point of contact for provider enrollment, Medicare coverage and billing requirements, and the processing and payment of fee-for-service claims. However, CMS recently upped the ante by adding Recovery Audit Contractors (RACs) to their arsenal. This group of outside contractors has been hired by CMS with an added incentive to ferret out any improper payments … the RACs receive a percentage of whatever they recover.

Tennessee's RAC

The Centers for Medicare and Medicaid Services awarded Connolly Healthcare the contract to provide recovery audit services as mandated by the Tax Relief and Health Care Act of 2006. Connolly's coverage area is Region C, which includes Tennessee along with 14 other states and the territories of Puerto Rico and the U.S. Virgin Islands. (www.connollyhealthcare.com).

Although no one can justly argue that the federal government should be expected to overpay providers, there are concerns about how aggressive an outside – but financially interested – party will be in finding "mistakes" that will ultimately put money in their own pockets. Part art, part science … the industry's complex coding system has an element of subjectivity to it and therefore lends itself to differing interpretations of proper reimbursement for sets of services. Furthermore, providers have long argued that determination of the most appropriate course of treatment should be put in the hands of those with medical training rather than left up to someone whose background is financial in nature.

So what happens if a RAC knocks at your door and determines an overpayment has been made? If the provider disagrees with the finding, there is a multi-step appeals process that must be followed to have any chance at ultimately keeping the disputed payments.

Law firm Miller & Martin, which has offices in Nashville, Chattanooga and Atlanta, has formed a specialized RAC legal appeals team to assist clients in navigating the complex appeals process.

Ken Bryant, member at Miller & Martin, explained if the RAC determines CMS has made an overpayment, the next step is to withhold the upcoming Medicare payment or payments to the implicated provider until the amount in question has been fully reimbursed to the federal agency. For financially distressed facilities, there is a slow pay plan to help lessen the burden of temporarily losing a significant chunk of revenue.

Of course, Bryant added, if a provider who has been docked the alleged overpayment is ultimately found to have been correct in their coding and billing practice, the money in question will be reimbursed with interest from the point it was withheld.

However, he continued, it's a mistake to assume that filing an appeal will put a halt to CMS' plans to dock future payments while the case works its way through the system. The only way to ensure Medicare reimbursements aren't immediately disrupted is to meet specific, stringent deadlines in the appeals process … and even that doesn't ultimately guarantee cash flow won't be interrupted.

After an audit, if an unfavorable letter of determination is received from the RAC, providers have five levels of appeal – Redetermination, Reconsideration, Administrative Law Judge, Medicare Appeals Council, and the United States District Court. There is no monetary limit to the first two levels of appeal, but the amount in controversy must exceed at least $120 to continue on to level three in the process. To proceed to the fifth level, the amount remaining in dispute must be at least $1,220.

"Before you get to the appeals process, you have 15 days for rebuttal," Bryant said, adding this information is sent directly to the RAC. He also underscored that the general appeals process timeline begins from the letter of determination and is not halted during the two weeks a provider has to respond to the RAC.

"From this initial letter of determination, you have 120 days to appeal to a fiscal intermediary," said Bryant. He added the "to whom" you should appeal would be included in the determination letter. The fiscal intermediary then has 60 days from the date of receipt of the appeal to issue a redetermination decision.

Although providers have 120 days to file their appeal, recoupment of the funds in question begins on day 41. "However, a provider can stop recoupment if the provider files an appeal within 30 days," Bryant said. He continued, "But you can only stop recoupment through 60 days of level two."

Bryant noted, "It's very important to work with your IT folks to keep up with dates. It's a true trap for the unwary."

If a provider is unsuccessful at redetermination, the next option is to file a second-level appeal for reconsideration. This appeal must be filed within 180 days from receipt of the fiscal intermediary's redetermination decision. This appeal is made to a Qualified Independent Contractor (QIC), which has been appointed by CMS. Again, if the case hasn't been settled by 60 days into this level of appeal, then recoupment of the disputed funds begins.

At this level, it is crucial to make certain the material record is complete as additional evidence in support of a claim won't be admitted at later appellate stages unless the provider can show just cause why the information wasn't previously available.

"It's important to involve counsel before you get a determination letter," said Bryant Witt, co-chair of Miller & Martin's Healthcare Practice Group, "but certainly early in the process. Once the record is made … it's made."

At the second level, the QIC has 60 days from the date of the reconsideration request to issue a decision. After that, if a provider still isn't satisfied with the outcome, the third level of appeal is to request a hearing in front of an Administrative Law Judge (ALJ). This request must be filed within 60 days of the QIC's decision.

"You get a decision from the ALJ within 90 days, and hearings are mostly done by video conference or telephone conference," explained Ken Bryant. This decision is binding unless overturned or revised at the higher levels of appeal. "You've got to have a good case … make sure on the front end," Bryant said of taking the process this far. "A lot of it is going to be subject to proof. We're going to have expert witnesses but so will the RACs."

The fourth level of appeal is to the Medicare Appeals Council (MAC), within the Department Appeals Board of the United States Department of Health and Human Services.

"You must file within 60 days of notification by the ALJ," Bryant said. "Again, you're limited to the record created at the level two appeal. There's no hearing at this level. It's briefs and supplemental information. Determination is to be made in 90 days."

Of the last resort, Bryant noted, "You have 60 days from the adverse MAC decision to appeal to the federal court. There is a $1,220 monetary threshold."

He continued, "We may very well spend two years per group of claims so you're looking at a pretty lengthy appeals process. You have to use some business judgment as to whether or not to appeal."

In the demonstration program conducted by CMS, most reversals came in the first two levels of appeal, but the majority of cases resulted in favorable decisions for the RACs.

Witt pointed out, "During the demonstration program, there were about 525,000 determinations of overpayment. Of those, 118,000 claims were appealed; 40,000 of those appeals resulted in a decision in favor of the provider. That's a 34 percent rate."

He concluded, "There's a feeling that the playing field isn't particularly level. That's not to suggest anyone doing anything inappropriate, but RACs have a vested interest."